On Valuing Nature’s Water Infrastructure

Can you manage what you don’t measure? Produce such as coffee, cotton, and oil are traded commodities that are measured, managed, negotiated and priced based on market supply and demand. Yet, what happens when measuring things of great value that are more nuanced, more complex, not commodities, not privately owned and not traded in markets, such as rainfall, rivers, wetlands, or biodiversity?

Designed for the World Forum on Natural Capital, this Forest infographic illustrates the short-term value of felled trees to the timber industry when compared to the long-term benefits of healthy forests to society. The numbers speak for themselves, $0,4 trillion versus $3,7 trillion.

This valuation approach is not new. Inspired by the Stern review, TEEB or ‘The Economics of Ecosystems and Biodiversity’ is a global initiative set up in 2007 that focuses on making nature’s values visible. As Prof. Ed Barbier (a member of TEEBs Advisory Board) puts it, “we use nature because it is valuable, we lose nature because it is free”.

Adam Smith’s ‘Diamond-Water paradox’, differentiating value and price, states that water is considerably more valuable than diamonds, yet diamonds command a much higher price. This resonates with more people than ever before. Daily news on floods and droughts, and the loss of services we receive from ecosystems is concerning. Securing Water, Sustaining Growth from the Global Water Partnership/OECD Task Force on Water Security and Sustainable Growth, reports the ‘monetization of environmental risks, and the ecosystem services the aquatic environment renders’ – is classed as a pressing challenge we have still not been able to address.

Pollution, over-abstraction, dams altering river flows, deforestation causing soil erosion and desertification, and climate change can all have devastating impacts on our water resources. The most recent estimates of wetland loss show that as much as 64% has been lost since 1900. In 2013, over 80% of Asia’s rivers were rated by the Asian Development Bank as having poor health because of pollution and the damming of rivers. In the United States alone some 750,000 kilometres of rivers, or 19 times the earth’s circumference, are classified as degraded. Biodiversity – the living fabric of this planet’s surface – its ecosystems, species, genes - is suffering catastrophic losses. Of more than 25,000 freshwater species assessed for the IUCN Red List, one-third are threatened with extinction, and according to WWF’s Living Planet Index, freshwater species populations have declined by 76% since 1970. This is double the rate of decline compared to any other biome. If we are not careful, our rivers may end up as empty, lifeless channels.

Water-related ecosystem services such as wetlands filtering contaminated water, mangroves protecting shorelines from extreme weather events, floodplains absorbing excessive storm waters, lakes storing large water supplies, all these services perform an infrastructure-like function.

But they are not built infrastructure; these natural water infrastructures are shaped, grown, eroded, or deposited by nature. ‘Going with the flow’ or working with nature can optimise the performance and financial benefits of engineered infrastructures. Costanza et al. valued the societal benefits of natural water infrastructure services at $29 trillion per year¹.

Natural infrastructure provides services that underpin the way we manage our river basins and therefore the way we grow food, generate electricity, and supply water to cities. At the same time it maintains important biophysical processes, and endows our environment with species and habitats. Critically, water drives our climate, and therefore climate change affects the hydrology we so heavily rely upon. The majority of adaptation finance is used to solve water management challenges on the ground, and yet water is poorly integrated into climate change policy discussions and funding proposals.

Between 1997 and 2011 the estimated loss in annual services from ecosystems was $2.7 trillion for swamps and floodplains, and $7.2 trillion for tidal marshes and mangroves . An Asian Development Bank study reported Asia’s poor river health could threaten $1.75 trillion in ecosystem services annually.

Our lack of awareness of these problems has been going on for so long and is so extensive that we have become inured to it, almost blind to its severity and its costs. Shareholders would never allow the capital base of a business to be eroded to such an extent. They would demand change. Yet, despite all of us being shareholders in the natural capital of the world’s ecosystems, we seem unable to create the critical political momentum needed to take action on the scale needed.

Wake-up calls abound. The World Economic Forum (WEF) in their 2015 report recently ranked water crisis as its top global risk; a recent CERES report concluded that the food industry is unprepared for global water scarcity; and the ‘Securing Water, Sustaining Growth’ study highlighted how water insecurity is a strain on economic growth. Our growth agendas of today risk playing dice with poverty reduction and prosperity if water risks continue to go unrecognised as a key to binding the economic system together.

This week, the Ramsar Convention on Wetlands is holding its triennial conference in Punta del Este, Uruguay. The Ramsar Convention is the only intergovernmental treaty that provides the framework for national action and international cooperation for the conservation and wise use of wetlands and their resources. With the right ambition and motivation, the governments gathered at this conference and their NGO partners can be catalysts for change that is big enough to stop and reverse a terrible history of ecosystem loss and destruction. This is a goal that demands we look beyond business as usual. We must invest in natural infrastructure if we want the business of environment to continue to provide its treasures going forward.

With the agreement of a new set of Sustainable Development Goals in New York in September, and a new settlement on tackling climate change in Paris later this year, the Ramsar conference must take up the challenge of inspiring action on our natural infrastructure. Just like shareholders jolted into action by a crash in the capital value of a business, we must galvanise our countries and communities to take large-scale action to protect nature, stop its destruction, and begin restoring what’s already gone.

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[1] R. Costanza et al./Global Environmental Change 26 (2014) 152-158